Traverse City Tourism – formerly the Traverse City Convention and Visitors Bureau (TCCVB) – is filing an appeal with the state after receiving notification the city is revoking its tax-exempt status for its Grandview Parkway building.

The property has been tax-exempt since the organization's inception in 1995, when the Downtown Development Authority (DDA) gifted the land for $1 to the TCCVB Education Foundation, a 501(c)(3) organization formed by bureau officials. The Education Foundation is the official titleholder of the property and leases building space to Traverse City Tourism, which would otherwise not qualify for an exemption.

City commissioners questioned the arrangement late last year, noting the Traverse City Area Chamber of Commerce – which had a similar proposed exemption arrangement rejected for its building just down Grandview Parkway – provides equitable services to the community and must pay property taxes.

Commissioners' queries led to City Assessor Polly Cairns undertaking a formal review this year of all 100-plus tax-exempt properties in the city, at the conclusion of which she identified three properties that “do not meet statute requirements for their current operating activities”: the TCCVB Education Foundation (assessed at a taxable value of $1,050,000), Access Dental on Munson Avenue (taxable value of $183,100) and Michael's Place on Rose Street (taxable value of $92,500).

“As a general rule, tax exemptions are to be strictly construed in favor of the taxing unit,” Cairns wrote in a summary to City Manager Jered Ottenwess. “Procedure for reviewing exemptions are that the rule to be applied...is to be construed strictly against the property owner and in favor of the public.”

Ottenwess tells The Ticker “there's a pretty narrow category of properties that are eligible for the exemption,” and that the TCCVB Education Foundation “does not meet the criteria” established by the state for nonprofit charitable organizations.

Ottenwess said he and other city staff have been meeting with Traverse City Tourism leaders for months, and that it “wouldn't have come as a surprise” to them when they received notice earlier this month.

That notice also included the organization's first property tax bill for $54,659, which has since been paid, according to City Deputy Treasurer Brian Postma. A second bill for $5,469 is scheduled to be sent this winter, says Postma.

The city was notified this week that the organization is appealing the ruling to the Michigan Tax Tribunal, and is also challenging the property's assessed taxable value, arguing it should be $700,000 instead of $1,050,000. Ottenwess says that while city officials and the property owner have an opportunity to resolve the dispute before it proceeds to the state, “it doesn't look like (a resolution) will happen” in this case, meaning the state will ultimately have the final say on whether the property is tax-exempt.

Traverse City Tourism Media Relations Director Mike Norton tells The Ticker the organization is “simply pursuing the very normal course of trying to get clarification from the city and the state tax tribunal.”

“Specifically, we have questions about why the city arbitrarily revoked an exemption they gave us 19 years ago, even though our mission and activities are the same as they were then,” Norton says. “We also have questions about the value the city has assigned to our building.”

Traverse City Tourism President & CEO Brad Van Dommelen could not be reached for comment.